Once a business stops operating, it’s important that it properly dissolves and finalizes all its regulatory and commercial commitments. In New York, this won’t only consist of filings with the federal government, the state, and its counties and cities, but also concluding relationships with the business’s employees and commercial partners.
Businesses dissolve for myriad reasons. On one hand, a business may close because it can’t pay all of its debts. On the other hand, it may close because someone wants to retire. Nevertheless, if you have decided to dissolve a New York business, you must do so in a specific manner to protect members or owners from personal liability. If not properly dissolved, the business may continue to accumulate government fees and fines, commercial debt, and possibly default court judgments. Further, an improperly dissolved business could become a credit liability for its owners, preventing future investment and financing opportunities.
If you’re just starting out in business, let us help you form your New York corporation or LLC. Our business formation services are quick and easy and can help you get off to the right start. Use our New York LLC Formation Service or Corporation Formation Service for help when you’re ready to start a new business.
Your New York business is more than likely a corporation or LLC. If so, your business is its own “person” and is expected to conduct all its affairs in its own name. It’s very important for limited liability purposes that you respect the personhood of your business. If you ignore this status, the owners may be personally liable for the business’s debts. Therefore, it’s good practice that all the business’s activities, whether internal or external, are in its name, reduced to writing, and filed in a common location. Before you begin the dissolution process, we suggest that you gather all these documents and have them ready. It’s easier to have them on hand, rather than look for them or generate them once a New York voluntary dissolution of a business is underway.
If you have been in business for any period of time, then your business probably has assets. Generally, the value of these assets is the value of your business. Most assets that contribute to the value of a business are tangible (e.g., inventory, vehicles etc.). Occasionally, intangible assets can also contribute to value (e.g., trademarks, copyrights etc.). It’s not easy to value a business, and we encourage you to hire a professional if you become overwhelmed with valuation or asset identification issues. Lastly, gather all relevant tax information related to the business and its assets. Tax treatment is an important consideration in the value of assets and the business itself.
Once you have created a list of the business’s assets and their values, gather all the supporting documents into a central place (e.g., titles, bills of sale, etc.). You will use this information in Step 6 when you deal with creditors and consider a final distribution to owners.
Developing a clear picture of your business’s debts is critical to a proper dissolution. If you’re thorough in this step, it will go a long way to protecting the business’s owners from personal liability. Similar to what you did in Step 1, develop a list of business creditors and the amounts owed to each. Then gather all supporting documents into a common file that supports the value of each debt. You will need this information in Step 6.
Don’t simply think that because you closed your business it doesn’t have to pay its debts. While New York statutes provide a very narrow mechanism in the dissolution process for not paying creditors, generally your business must pay all its creditors. If it doesn’t, the business’s owners may become personally liable.
There is a different procedure for how to dissolve a business in New York for both corporations and LLCs. Be sure to know which one of applies to your business:
Dissolution documents for both corporations and LLCs can be filed either in person, by mail, or via fax with the New York Department of State (NYDOS). There is no online filing option.
If your business is a corporation or LLC, then it may have a governing document. This document is called the bylaws for a corporation and an operating agreement for an LLC. Within the governing document are instructions on how to dissolve your business. Be sure to review and follow those instructions. That said, you must also be sure to follow the New York business dissolution statutes—even if your business has a governing document. There are specific statutes for both corporations and LLCs. Finally, it’s good business practice to record in writing all the dissolution activity of the business (e.g., voting of owners, notice to creditors etc.).
If you have a New York LLC we can provide your NY Operating Agreement Template. Having an operating agreement in place can make dissolution easier.
In the course of its life, your business probably acquired one or more licenses, permits, or registrations. Make a list of all these documents and file the proper paperwork with each agency to terminate them. You don’t want to accumulate fees and fines for useless licenses and permits due to automatic renewals or non-compliance fines. Be mindful that licenses, permits, and registrations exist at the state, county, and city level. So make sure you check at each level of government for any final filing requirements.
If your business has employees, make sure to check with the New York Department of Taxation and Finance, as well as the state’s Department of Labor for final filing obligations. Also, if you’re a New York corporation, you will need a New York state tax clearance letter. At the federal level, check with the Internal Revenue Service for final tax filing obligations. Finally, cancel all your business’s tax identification numbers with both the State of New York and the federal government.
At this point, New York statutes require that you give notice to the business’s creditors that you’re dissolving (you generated a list for this in Step 2). New York gives creditors a period of time to file a claim with your business. It’s important to not dissolve your business before this notice period ends. If you do dissolve before this time is up, then the business’s owners could be personally liable for creditor claims. If a creditor files a claim with your business, we encourage you to seek professional help to determine whether you should pay the claim.
Now that you’ve completed these steps, you can file your dissolution documents as established in step 3. Note that you need to file the right document depending on whether your business was a corporation or an LLC.
Keeping up with your business’s filing requirements is important to stay state compliant, no matter where you are in your business’s life cycle. But we are here to help. We specialize in helping our clients form and run a more smooth and efficient business through our slate of formation and compliance tools and services. Review the many different services we offer to elevate your business operations to the next level.
Disclaimer: The content on this page is for information purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
To dissolve a New York corporation or dissolve a New York LLC, visit the New York Department of State Division of Corporation’s website for general instructions.
Filing fees are subject to change, but the New York Department of State maintains a current fee schedule.
In normal circumstances, allow approximately 14 days from the date you send your documents to the Department of State to dissolve a New York LLC, which is after you receive tax clearance from the Department of Taxation and Finance, which itself may take two weeks. As well, there is no online dissolution service, so you must deliver the documents in person, by mail, or via fax. However, New York does offer expedited services allowing processing in as fast as 2 hours. All that said, be sure to comply with the New York minimum notice period for business creditors to make a claim for payment.
You must submit a dissolution plan to the New York Attorney General prior to any dissolution of a nonprofit with the New York Corporation Commission.
New York Business Resources
Business Dissolution by State